Six criteria set resolution planning scope for systemic insurers
Authorities must establish tailored resolution frameworks for systemically critical insurers to protect policyholders and prevent taxpayer bailouts. The Financial Stability Board issued guidance defining six criteria to determine which firms require firm-specific resolution plans.
From holding company to operating entity
Resolution authorities must tailor strategies to an insurer's structure and centralisation, establishing specific points of entry for intervention.
For standalone subsidiaries with local client bases and low interconnectedness, resolution occurs at the individual operating entity level.
In contrast, groups with centralised treasury operations, shared services, and internal reinsurance require execution at the holding or sub-holding company level.
Across all structures, the primary objective is safeguarding policyholders, beneficiaries, and critical economic functions without taxpayer bailouts, ensuring shareholders and unsecured creditors absorb losses in accordance with the creditor hierarchy.
Restructuring, run-offs and temporary stays
The framework outlines three core resolution toolsets: business transfers or creditor-financed recapitalisations via liability writedowns, orderly solvent or insolvent run-offs of legacy books, and temporary stays on contract surrender or early termination rights.
Operational plans must also account for cross-border recognition, reinsurance transfers, continuity of derivative hedges, and uninterrupted access to financial market infrastructures during crisis execution.
Solid blueprints facing cross-border reality
The guidance provides a solid theoretical blueprint for insurer resolution without public bailouts.
However, heavy dependence on cross-border coordination and timely data leaves execution vulnerable during market panics.
True resolvability remains untested until authorities face a distressed global insurance conglomerate.